Argentina's debtors: Young people lead defaults, banks hold most debt

An in-depth analysis of debt in Argentina reveals distinct patterns across different demographics and financial institutions. The study indicates that young people exhibit the highest rates of non-payment, with four out of ten in this group owing money.

While traditional banks, both public and private, hold the largest volume of unpaid debt, approximately 65% of the total amount, institutions operating outside the formal banking sector present more concerning default rates. These include non-bank credit cards, quick lenders, and supermarket or appliance store financing.

Fernández's research, based on Central Bank data, categorized 518 entities into 12 groups. It found that while banks had 1.59 million debtors with a median debt of $1.46 million, entities like quick lenders, which often require minimal documentation, collectively accounted for 22% of debtors with a median debt near $500,000. These lenders showed average default rates as high as 52%, with some reaching 86%.

Mercado Pago, frequently cited in public discourse on debt, represents a smaller portion of the overall debt burden than often perceived. The study highlights that a significant portion of debtors owe less than a minimum wage, while a smaller group of individuals with the largest obligations accounts for the majority of the total money in default.

The analysis suggests that some non-bank lenders may be managing credit in a manner inconsistent with the risks associated with volatile interest rates and a disinflationary environment. The consultant behind the study, Matías Fernández, recommends that the Central Bank enhance its oversight of these entities.

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Clearly, these institutions are managing credit in a way that is not consistent with the risks involved in operating in a disinflationary program and volatile rates.